Course Code: 114

Duration: 1 day

Level: Intermediate

Fee: $795.00

Instructor: Charlotte Scott

CPE Credits: 7

Prerequisite: Seminar 102 (Introduction to U.S. Securities Processing) or the equivalent is recommended but not required

This one-day course provides a "behind-the-scenes" perspective of a business that has experienced record levels of growth, producing a critical source of revenue for both the buy-side and the sell-side of financial industry. It is intended for an audience who is interested in receiving an overview of the securities lending business, including the motivation of participants, the lifecycle of a securities lending transaction, and resulting risks.

The main types of securities lending transaction activity will be covered, including stock borrow/loan, repo/reverse repo, tri-parties, buy/sell backs, and dollar rolls.  Participants will gain perspective on the historical evolution of this market, its place in the international financial markets today, as well as regulatory considerations, both for the U.S. markets and abroad. 

The role of institutions, investment managers, bank broker/dealers, custodians, prime brokers and industry organizations such as clearing houses and centralized securities depositories will be examined. The program will also provide insight into the "Lessons Learned" from the recent global financial crisis, and trends in the securities lending business in the post-Lehman era. 

Topics for discussion include:

Introduction to the Securities Lending Market

• Why it exists and its historical evolution
  
• Motivation of participants: bank broker/dealers, institutions, global custodians, hedge funds, prime brokers, clearing houses and depositories
  
• International coverage
  
• Reasons for borrowing/lending
  • Short selling
  • Fail coverage
  • Trade financing
  • Match-book
  • Arbitrage strategies

• Stock borrow/loan
• Repo/Reverse repo
• Tri-Party programs
• Buy/Sell Backs
• Dollar Rolls

Life Cycle of a Securities Lending Transaction

• Master Lending Agreements
• Origination - opening leg
• Finding a counterparty: agents and intermediaries
• Counterparty Risk Management Considerations
• Available Inventory and portfolios
• Rebate/Fee Negotiations
• Loan Confirmations
• Transfer of securities and collateral
• Loan Maintenance
• Mark-to-Market and Margin Calls
• Income and Corporate Action Events
• Voting Rights and other entitlements
  • Loan recalls
    • Why they occur and how they are managed
    • Associated fails and their implications
  • Payment of rebates and fees

Collateral Management

• Types: Cash and Securities
• Hair-cuts
• Collateral substitutions
• Collateral profiles
• Hypothecation
• Close-outs

Risk Management and Regulatory Considerations